Basic healthcare for all in China

The plan, which aims to bring coverage to 200 million uninsured Chinese, could potentially create a huge market for foreign pharmaceutical companies and health service providers.

Poor and middle-income Chinese list healthcare provision as one of their biggest concerns, as the illness of one family member can wipe out years of savings in medical bills.

The worries around healthcare are contributing to a high domestic savings rate and low domestic consumption amid the global economic downturn, making the recession bite harder than it otherwise might.

Hu Xiaoyi, vice minister of human resources and social security, said China's 200 million uninsured would be top priority for the government in the next three years.

But the plan still relies on the regulation of drug prices and limited participation by international insurers.

The plan requires 520 billion yuan in funding from the coffers of China's local governments. This represents around 60% of the total cost of the programme. This is considerable less than the 73% required of local governments in recent years, but the collapse of the real estate market and the removal of grains taxes could put a further strain on local government budgets.

Under the ambitious plan, thousands of county hospitals and township clinics will be built or upgraded, with a hike in the insurance subsidy available to those from rural communities to 120 yuan annually.

While the plan calls for the increased use of commercial insurance, the market remains largely closed to international players, in spite of their much greater experience in the field.

Drew Thompson, director of China Studies at the Nixon Center in Washington, said that the global financial crisis did not help international insurance companies make the case to Chinese regulators that they had valuable experience and contributions to make.

However, he said, greater market access, would result in healthcare sector competition.

The new health plan calls for a cap on the amount that hospitals and distributors can charge for drugs and seeks to regulate the gap between patent and generic drugs.

Chinese people frequently complain that hospitals pad their revenues and doctors' salaries by prescribing expensive or unnecessary medication.

Peng Sen, vice director of National Development and Reform Commission, said the government aimed gradually to cut the profit margin of drugs sold at medical institutions, and require the non-profit sales of drugs at local public clinics.

Exactly which drugs will be covered will not be known until the end of the year; intelligence that is currently eagerly awaited by big pharma.

The aim of the plan is to relieve the pressure on specialised city hospitals with the provision of healthcare for common complaints conducted mostly by neighbourhood hospitals and rural clinics.

But local clinics lack equipment and well-trained staff, giving them a bad reputation among Chinese rural communities.

Vice-minister of finance Wang Jun said it was important to boost the status of clinics and primary care facilities, which could only happen when people trusted the medical care system.

The new plan will experiment with better pay structures for doctors, government support of hospital upgrades, and partial privatisation of some facilities.